Hospitals provided $521 million in uncompensated care

Minnesota’s largest hospital systems provided $521 million in uncompensated medical care in 2012, an increase of 2.3 percent from the previous year.

It was the slowest rise in five years, according to a new report from the Minnesota Hospital Association, which has shown a steady increase in care given to patients who don’t have insurance or the means to pay, particularly during the economic downturn.

With the final elements of the Affordable Care Act rolling out this year, hospitals could see levels of uncompensated care decline in coming years, as more people come through their doors with insurance coverage.

But it’s too soon to see much of an impact, said Lawrence Massa, executive director of the Minnesota Hospital Association.

“We’re going to see changes, but they will occur slowly over time, assuming we see more folks getting coverage through MNsure,” he said. “It’s going to be a different world ahead, but those kinds of subsidized services and the need for charity care will still be there.”

Hospitals calculate the amount of uncompensated care based on a combination of charity care and bad debt. Charity care, which refers to medical services delivered for free or at a discount to low-income patients, dropped 16 percent during the year to $190 million in 2012, according to the report.

Bad debt, which arises when patients fail to pay their share of the bills, rose 17 percent, to $330 million. Part of that increase can be explained by a change in IRS rules, according to association officials. While the charity care costs are reported as the actual medical cost, according to the group, bad debt is reported at the “list price” or the “charge master” amount, which is rarely the amount hospitals are reimbursed because insurance companies pay a negotiated lower rate.

Massa said it’s an open question what will happen to uncompensated care in the future as the Affordable Care Act plays out. More people may have insurance, but many will be on government programs, which hospitals say fall short of reimbursing them what it costs to provide care and keep the lights on.

In 2012, the 133 Minnesota hospitals included in the report said they absorbed $1.7 billion in underfunding through government programs.

Additionally, hospital administrators remain concerned that many people may buy private insurance, but still take on higher deductibles than they can handle. That could leave hospitals still on the hook for medical services that don’t get paid. Massa suspects that if this happens, hospitals will apply a more flexible use of funds.

“Our members will probably be revisiting their charity care policies and looking at how charity care might be applied to deductibles,” he said. “Now if they’ve got coverage and they can’t afford their deductibles, there’s still going to be an opportunity for hospitals to rely upon their charitable mission and use charity care to offset those kinds of costs for some of the clientele that use the hospital.”